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Personal opinion follows…
I think that President Bush’s administration levied heavy pressure on specific industries to help keep the economy moving after 9-11. Starting with the auto industry and “zero/zero/zero” programs in the immediate aftermath of 9-11, then the mortgage loan standard reduction, the reduced interest rates, etc. Add in the changed bankruptcy laws that were passed while the Admin was pushing like hell to get people to spend themselves into oblivion…
But it is now more than 6 years later. GM is bordering on bankruptcy itself, the home mortgage situation is a catastrophe, and the banks in general are posting record losses (after 25 years of record profits).
We robbed Peter to pay Paul these past 6+ years. We spent ourselves into oblivion on both a personal level with mortgage and credit card debt, and at a national level with 20% per year increases in non-discretionary spending as well as 40% of our annual spending being “off-budget” in order to help hide the fact that we have been spending nearly 4 TRILLION DOLLARS a year with a deficit of 1.5 trillion instead of the mere .4 trillion deficit that is “on the books”
You can’t keep that up forever. And Paul has shown up with a court order for payment…
I don’t think the government did it. I think the auto industry, seeing falling numbers, made their own decisions. Likewise, banks saw that the standards they were using could be lessoned for potential huge wins.
It’s like going to Vegas and realizing that if you play Poker you have a chance to win a lot more money then if you play Roulette. However, in Roulette you have a 48% chance to win, in Poker you have a much, MUCH lower chance. (In Roulette you may bet on Red or Black which is 48/100 possible results, assuming two green squares.)
Well, they gambled, ON THEIR OWN, WITHOUT HELP, and lost. Now, as with the gambler that mortgaged his home to gamble more, they are on their own and should be. This will help weed out the lesser banks so that the strong banks can grow and prosper. It’s almost Darwinian.
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THe problem with that perspective Jen is that it ignores the White House claims that were made over the past 6 years. Each of the steps along the way, President Bush touted as a victory for his administration: growing car sales, record home ownership, increasing consumer spending…
President Bush TOLD us to go out and “shop” after 9-11. The biggest ticket items in the economy suddenly had super-cheap financing that anyone with a heartbeat could qualify for. Credit cards were presented to anyone with a pulse… including children and PETS (Clark Howard who has a financial radio program syndicated out of WSB in Atlanta has made repeated remarks about his own 9 year old daughter getting pre-approved credit cards, including Platinum AMEX; as well as pointing out the pre-approved Visa offer his dog received…)
That is too much of a coincidence to ignore.
Then, while everyone is handing away “free credit”, President Bush helps push through Congress a law that tightened the Bankruptcy laws to make more than half of the people ineligible to have their debts wiped clean…
When you ask people to spend, and when the finance entities all open up the flood gates of credit, and when Congress at Presidential request quietly changes the bankruptcy laws… sorry, that is a bit too much Deus Ex Machina for me to believe unless there was Administrative planning behind the multiple actions.
Presidents have claimed responsibility for everything good for all times. If they could get away with it, they’d claim they made the sun rise every 24ish hours and that it was they that brought the rain.
Realistically, it was the banks that lowered financing on autos, homes and later credit cards and it is THEIR bed they are now lying in.
I, honestly, don’t feel sorry for them. If they had just held to their OWN testing procedures instead of opening up the floodgates in hopes of making a quick buck and cashing out on their stocks for early retirement, they wouldn’t be in this mess. And, you know what, not every bank and mortgage firm IS in this mess.